Urbanisation: Low-cost housing not low-cost enough

Urbanisation is inevitable, whether or not election manifestos or government policy documents acknowledge it as such. Approximately 60% of the South African population currently lives in urban areas.
This figure will increase as a result of natural population growth and the further migration of people to cities in search of economic opportunities.

In many African countries, including South Africa, the standard government response to poverty associated with urbanisation (existing in backyard shacks, informal settlements and “bad” buildings) has been to focus on improving standards of living in rural areas in order to prevent rural-urban migration, and to criminalise poverty in urban areas by evicting people from their shacks and clamping down on informal livelihoods.

These policies have failed because they do not engage with the reality of urbanisation as a historical phenomenon. Viewed historically, South Africa is not urbanising exceptionally fast at all. South Africa’s urbanisation rate is 1.21%, comparable to Spain’s rate of 1% and much less than India’s rate of 2.47%. In addition, more people are being born in cities than in rural areas.

Although there are many reasons why people choose to migrate to cities such as Johannesburg, a job – any job – is the main goal. Yet the jobs available do not pay people enough to live in urban areas. Governments must supplement market-determined wages by ensuring access to city life for the poor. At the very least, this means ensuring access to water, electricity, sanitation, basic shelter and secure tenure.

A recent study published by the Centre for Development and Enterprise shows that the unemployment rate is much lower in South African cities than in rural areas, and that these cities “are places of (relative) hope”.

So how should the government respond to urbanisation? A shift in the discourse about urbanisation and proactive public sector responses to manage urbanisation in a way that maximises public welfare must be the first step.

Johannesburg’s inner-city accommodation crisis is one manifestation of what can happen without adequate public sector responses to urbanisation.

Recent research into the supply of and demand for low-income rental accommodation in its inner city, conducted by the Socio-Economic Rights Institute of South Africa (Seri) in November 2013, found that most poor and low-income households live informally because the accommodation supplied by the private sector and social housing institutions is not affordable.

The cheapest rental accommodation provided formally by the private sector is a room that costs R1 700 a month. To afford it, a household would need to earn about R5 700 a month.

But half the households currently living in the inner city earn less than R3 200 a month.

Social housing is aimed at formally employed households that earn between R3 500 and R7 500 a month. At the time of Seri’s research, only one social housing unit was available at a just-affordable R1 036 a month. The problem, therefore, is not merely one of affordability but also one of availability and scale.

As a result of this gap between demand and supply, which affects half of Johannesburg’s inner-city population, many people live informally in dilapidated high-rise buildings, flats, houses, rooms, parts of rooms, balconies and in bed-sharing arrangements. Some of this accommodation is affordable: part of a shared room costs between R100 and R900 a month, and it costs between R450 and R550 a month to share a bed. But most of it is unsafe, legally insecure, lacks privacy, is overcrowded and contravenes municipal by-laws.

The City of Johannesburg has persistently acknowledged this problem. In its policy document, Jo’burg 2030, which contains its long-term economic vision, the city states that, in relation to low-income housing, “the policy should look at rental stock in the light of the fact that many low-income households may in fact migrate over time to cities that offer greater opportunities to less skilled workers”.

The city’s recent inner-city transformation road map reiterates the need for low-cost rental accommodation. It states that“much of [the] new housing stock is directed at low- and middle-income households, rather than at very poor households”.

Thus, the city clearly recognises the need to plan for urbanisation and the importance of providing for low-income households living in the city.

But talk is cheap. Despite these acknowledgments, the city has failed to formulate or implement a coherent and meaningful response to the dire need for affordable rental accommodation in and around the inner city.

In this context, any affordable rental supply is a good thing. Indeed, attracting private property investors to the inner city has been high among the city’s priorities for many years, forming the basis of its inner-city regeneration strategy.

But the city wants to have its cake and eat it too. For example, the city recently sought to apply very high commercial property rates to high-rise residential buildings with shops on the ground floor. This clearly makes rental accommodation much more expensive.

It took this struggle to the Supreme Court of Appeal, where its decision to charge these rates was labelled “absurd”. Given that commercial rates are three times higher than residential rates, such a move would undoubtedly have an enormous impact on access to rental accommodation in the inner city.

The city, while arguing that the private sector holds the key to solving the housing crisis, makes it increasingly difficult for the private suppliers of rental accommodation to target even moderately low-income households.

The problem goes further than the market, though. As long as the city relies on market forces to facilitate development, poor and low-income households earning less than R3 200 a month, which constitute more than half of all households in Johannesburg, will continue to live without formal accommodation options.

There is no indication of how the city intends to incentivise the private sector to provide the type of affordable accommodation it has failed to get them to develop.

Put simply, there is no profit to be made in housing the poor, so the private sector is not interested, and the poor go without adequate housing. As long as the state fails to step in with affordable public rental accommodation, this will not change.

The city’s role should be in directly ensuring the supply of affordable rental accommodation that would cater for those households currently living in the inner city that earn less than R3 200 a month, estimated to be 34 000 households; 31% of these households earn less than R1 600 a month and can afford to spend less than R450 a month on rent, and 18% of these households earn between R1 600 and R3 200 household income a month. They can afford to spend between R450 and R1 050 a month on rental – a range that private rental supply does not reach and that social housing barely touches.

There is a debate about whether or not poor and low-income households like these should be living in the inner city at all, but evictions jurisprudence has clearly shown that the city can no longer stand by and allow evictions to take place, simply wishing people away. It is obliged to engage meaningfully with people and, in the case of eviction, consider the provision of alternative accommodation near where people live and work.

The government may argue that RDP housing provision on the periphery of the city is the solution to the accommodation crisis and that it is unfair to favour inner-city residents when “the queue” for RDP housing is so long already, but these arguments are flawed.

Seri’s research shows that no formal providers of accommodation currently cater to poor and low-income households in the inner city, and that no policy currently addresses the housing needs of these inner-city households. A public rental policy that addresses the capital costs of development, the operating costs to maintain affordability and the management of the stock is urgently required.

Without it, the ongoing pressures of urbanisation will lead to more slum development, which does not benefit the city, the private investors it courts, or the poor and vulnerable residents of such accommodation. If a public authority doesn’t prioritise the poor, no one else will.

Lauren Royston is the director of research and advocacy and Michael Clark is a legal researcher at the Socio-Economic Rights Institute of South Africa